s FX intervention on the table

In late July, White House Commerce Advisor Peter Navarro presented to Trump ideas on how to weaken the US dollar. Trump quickly cut him off and rejected the idea.

"A room person said Navarro had only just begun to speak on his presentation before being" smashed "by Trump. A second source who attended the meeting confirmed this.

However, just a week later, Navarro was the only one in Trump's cabinet to support him in his decision to impose new tariffs on China. Perhaps his opinion is already being respected more.

Marketers believe that weakening the dollar is not really an option; mainly because it is a very bad idea. However, imposing tariffs right at the beginning of new negotiations is also not good news for the United States or for the global economy. Trump is playing by his own rules and we may be underestimating the risk of some action against the dollar. His comments today are disturbing.

"As your President, one would think that I would be thrilled with our very strong dollar. I am not! The Fed's high interest rate level, in comparison to other countries, is keeping the dollar high, making it more difficult for our great manufacturers like Caterpillar, Boeing,........John Deere, our car companies, & others, to compete on a level playing field. With substantial Fed Cuts (there is no inflation) and no quantitative tightening, the dollar will make it possible for our companies to win against any competition. We have the greatest companies.......in the world, there is nobody even close, but unfortunately the same cannot be said about our Federal Reserve. They have called it wrong at every step of the way, and we are still winning. Can you imagine what would happen if they actually called it right?"

Trump is currently arguing that if he pressures the Fed to cut interest rates, the dollars will win. Most likely he is wrong. The central bank will not return interest rates to 0% unless the economy is facing a major problem. And if that happens, it will have the opposite effect, because the dollar will become a hedge and counteract the effect of the interest rate drop.

Read more:

• NZD/JPY – Short with the main movement after a price action signal
• Jeffrey Gundlach: “USD’s next move is going to be down”
• Here’s a cable forecast for $1.40 till end of 2020
• NZD to 0.59 at end of Q1 2020
• Support for risky currencies as trade war hopes grow